I've read quite a few posts, lately, on ActiveRain and other sites, talking about commissions. What's fair? Who pays the commission? Are we worth what we charge? How come I didn't get 50% of the commission? And on and on and on. Anyway, I wrote this post back in July and thought it would be a good time to recycle it. Why not? It's mine and I can do what I want with it. It has been edited slightly (a lot). It doesn't answer all the questions but it does address one of my pet peeves, the ole' 50/50 split "requirement".
Ok, let me see if I can explain this commission split "thingie", in simple language. I am a listing broker, listing properties is what I do. When I meet with potential Sellers I discuss with them what it will cost them, to use my services and get their home sold. This, agreed upon amount or fee, depends on how realistic they are on pricing, how much time and money I will spend on marketing, whether I have to pay a referral fee, whether they are repeat customers or if I will be assisting them on another purchase or sale. The fee could be as low as x% or it could be as high as z%. The figure we arrive at is my fee, it will not change and it has nothing to do with the selling broker. Then together, the Seller and I will review market conditions, what their competition is and how much commission (fee) we need to offer the selling broker in order to be competitive. Once we arrive at a suitable percentage for the other broker (which may go up during the course of the listing) we add the two sides together and there you have it, the total commission the Seller will pay when the house is sold. As a listing broker, my fee has been decided in advance, and is a part of the listing agreement. It may be more than 50% or it may be less than 50% of the total commission. But what it is, is none of your business. It's a confidential agreement between me and my Seller.
Now, as a Buyer's broker, the amount of compensation, that my Seller is willing to contribute for your services, is the amount that is fully disclosed in the MLS, nothing more and nothing less. This is a contribution towards your fee, that you should have already agreed with your Buyer, by means of a "Buyer's Broker Agreement"(BBA). If you are not using a BBA in your business then you are doing yourself and your Buyer a disservice. A BBA gives you the advantage of being able to discuss your fee, with the potential Buyer, prior to showing them any properties, also, it lets the Buyer know, that the Seller will be contributing to this fee by offering a co-broke fee in the MLS. The Buyer has the advantage of knowing that his broker is free to show them any and all properties that may meet their needs, be it a FSBO or a listing with a lower co-broke, that you may not normally want to show. A BBA ensures that you and the Buyer are on the same page.
Folks, you need to be selling your services to your potential customer/clients before you go to work and you are selling them for a fee. Buyers have no problem guaranteeing you a certain fee if you are a professional hard working broker and are able to sell your services. You are in sales! Sell yourself! Quit relying on listing brokers to negotiate your fee. If you are not capable of negotiating your own fee then how in the world can you be expected to negotiate the best deal for your Buyer? Ourselves and our services, are really the only things we have to sell, houses sell themselves. If you are not "listing" your Buyers, with a "Buyers Broker Agreement", then unfortunately you are at the mercy of what is being offered in the MLS, and that may or may not be a 50/50 split. So if you are not happy with your split, don't get mad at me, as a listing broker, it is not my job to negotiate your fee, it is my job to sell my Seller's property. And for that I will be paid fairly. Will you?
Are you being short changed? Not by me!
**Each State may vary on laws relating to Buyer Broker's Agreements and types of Agency or Non Agency relationships. I use the word broker instead of agent, because in Florida, more times than not, we are Transaction Brokers, not agents.